Compliance Center: NCUA Board Chairman Matz Outlines Five Areas of Regulatory Relief

During her keynote speech to the Credit Union National Association’s annual GAC meeting, Board Chairman Matz described key areas that the Nationals Credit Union Administration (NCUA) will focus on to provide regulatory relief for credit unions.

“Since 2011, NCUA has streamlined and improved eight regulations to provide lasting relief for credit unions, but we’re not done yet,” Matz said. “I’m committed to making 2015 the year of regulatory relief.”

Matz described five areas in which NCUA will work to provide regulatory relief: supplemental capital, fields of membership, fixed assets, asset securitization and member business lending. This relief will help credit unions compete in a rapidly evolving marketplace. Matz made the comments during a keynote speech to the Credit Union National Association’s annual Governmental Affairs Conference. The full text of her speech is available online here.

Counting Supplemental Capital

Matz said NCUA will respond to comments that, under current law, the agency could count certain forms of debt as supplemental capital for the risk-based capital ratio.

“I understand the need for supplemental capital in certain circumstances,” Matz said. “So I assure you: I am committed to allowing supplemental capital to be counted in full.”

To do so, Matz said NCUA will take three actions:

  • Provide consumer protections;
  • Change the order of Share Insurance Fund payout priorities to recognize that supplemental capital accounts are not insured; and
  • Set prudent standards, such as minimum redemption periods, for credit unions to offer subordinated debt to supplement their risk-based capital.

Matz also said a working group she established is exploring ways to increase access to secondary capital for low-income credit unions this year. The group is discussing potential legislative and regulatory changes for raising supplemental capital.

“NCUA can allow certain forms of supplemental capital for both risk-based capital and low-income credit unions,” Matz said. “For credit unions without a low-income designation, legislation is required to allow supplemental capital to count toward the seven-percent net worth leverage ratio.”

To address this issue, Matz said NCUA supports H.R. 989, the Capital Access for Small Businesses and Jobs Act.

Expanding Fields of Membership

NCUA will implement rule changes by the end of the year to make it easier for federal credit unions to expand their fields of membership.

“You should not be required to get approval from NCUA each and every time you want to add another group,” Matz said. “Last year, we proposed a rule designating seven categories of associations federal credit unions could automatically add to their fields of membership. This year, we would like to add even more automatic qualifiers.”

Matz said the Field of Membership Working Group she established is identifying obstacles to membership expansion and recommending rule changes to increase flexibility.

Removing the Fixed-Assets Limit

Next week, the NCUA Board will consider a proposed rule to eliminate the five-percent cap on fixed assets and authorize federal credit unions to set their own prudent limits.

“We all know over-concentration in fixed assets like buildings is dangerous,” Matz said. “Credit unions should prudently and deliberately make decisions about the level of assets to hold, but they should be able to do that without needless red tape. Decisions to upgrade your technology or your facilities should be your decisions to make—and yours alone.”

Permitting Asset Securitization

As the credit union system grows in size and complexity, many credit unions have adopted more sophisticated financial innovations. NCUA is responding to these changes with a proposal to allow large, qualified credit unions to securitize their assets.

“Securitization would permit these credit unions to tap new sources of liquidity and reduce interest-rate risk by converting fixed-rate assets to cash,” Matz said.

NCUA is now fine-tuning the proposal. Matz said she hoped the NCUA Board would approve a final rule later this year.

Easing Member Business Lending Burdens

Responding to credit union comments that the waiver process for business loans sometimes prevents them from making timely and prudent loans, NCUA plans to eliminate the need for such waivers.

“We’re going to move away from defining highly prescriptive, one-size-fits-all business loan underwriting requirements,” Matz said. “You know your members’ needs better than we do. Our business lending rules need to reflect that.”

NCUA will continue to provide business loan guidance and supervise effectively for sound commercial lending practices. Additionally, the agency will lift unnecessary limits on construction and development loans.

Matz concluded her remarks by reminding her audience she will always listen to stakeholders’ concerns and ideas about removing regulatory burdens.

“We will listen, and, where sensible, we will act,” Matz said. “Our number one goal is to keep the credit union system safe, sound and sustainable. You will have greater freedom in pursuit of that goal.”

Compliance Question of the Week

Do we have to do cash advances for non-members and if we must, can we charge a fee?

Visa and MasterCard both require that financial institutions that have operating agreements with them cannot refuse a cash advance to an individual simply because they are non-member. So, if you do cash advances at all, you must process them for both members and non-members. They also both prohibit charging a fee for processing a cash advance.

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA announced that the Stabilization Fund received a clean 2014 audit.

The NCUA has released its agenda for the March 19 Board Meeting.

The NCUA announced that credit unions’ loan growth is continuing and that delinquency rates are staying the same.

NCUA Board Member McWatters delivered prepared remarks at CUNA’s GAC.

Consumer Financial Protection Bureau (CFPB)

The CFPB released a report that details its arbitration agreements study, noting that arbitration agreements can be harmful to consumers.   

Director Cordray delivered prepared remarks at the Arbitration Field Hearing.

National Mortgage Licensing System (NMLS)

The NMLS released its Fourth Quarter Mortgage Industry Report.

Federal Reserve Bank (FRB)

The March issue of Fedflash is now available.

U.S. Department of the Treasury (Treasury)

U.S. Treasury Acting Assistant Secretary Gerety delivered prepared remarks at CUNA’s GAC last week. Gerety’s speech focuses largely on cybersecurity.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of March 11, 2015. The last update prior to this was March 9, 2015.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, NCUA.